Lloyds to float TSB before the end of June and could resume dividend payments this year as profits rise

Lloyds Banking Group today confirmed it will launch a stock market float of its TSB subsidiary before the end of June as it reported a jump in first quarter profits.

The group, which is still 25 per cent owned by the taxpayer, said it will sell a minimum of 25 per cent of TSB and will offer some of the shares to retail investors.

The announcement comes as Lloyds posted a 22 per cent rise in profits to £1.8billion in the first quarter of 2014, strengthening the case for it to resume paying a dividend in the second half of this year. Shares in the group rose by nearly 4 per cent to 78.3p.

Preparing for an IPO: Lloyds is set to float its TSB business on the stock market before the end of June

Chief executive Antonio Horta-Osorio said: ‘Following the launch of TSB Bank in the second half of 2013, we have continued to prepare for an IPO (initial public offering) of the TSB business.

‘We are now well placed, subject to final regulatory approval and market conditions, to launch the IPO in the summer of this year.’

Lloyds Banking Group resurrected the TSB brand last year as a vehicle to hold the 631 branches it was ordered to sell by European regulators as a condition for receiving a £20billion government bailout during the 2008 financial crisis.

The group must sell its entire TSB stake by the end of 2015 but the sale is expected to be done in stages, similar to state-backed rival Royal Bank of Scotland's disposal of Direct Line, the insurance business it was required to offload as a condition of its 2008 bailout.

Lloyds had planned to sell the TSB branches to the Co-operative Bank, but that deal fell through amid concerns over the Co-op's capital position prior to a £1.5billion shortfall being exposed.

In March, the Government reduced its
stake in Lloyds to 25 per cent after a £4.2 billion placing of shares
with institutional investors. It further cut the Treasury's holding
after a £3.2billion placing last September.

Lloyds has not paid a dividend to shareholders since it was bailed out by the state during the financial crisis, but it said it was in a strong position to restart the payments, which need to be authorised by the Bank of England and could mean a full-year reward for shareholders.

'We will go into those discussions with confidence about the business and about our prospects,' finance director George Culmer said.

Lloyds also said it had lent £2.6billion to first-time homebuyers in the
first quarter, including £342million through the Government's Help to
Buy scheme.

And
that it had not needed to add to the billions of pounds put by to cover
compensation for customers who were mis-sold payment protection
insurance (PPI).

Richard Hunter, head of equities at Hargreaves Lansdown stockbrokers, said: ‘Lloyds is often seen as a proxy for the UK economy, and although they are inextricably linked, both are beginning to prosper after a long period of austerity.

‘Outlook comments are also upbeat, but not excessive given the fact that there remains some way to go.

‘Less positively, the Government stake remains an unwelcome influence, the stock cannot yet appeal to income seeking investors and the possibility of further regulatory censure weighs heavily on the sector.’